With Reserves Up, ICI Cuts Member Dues

The bull market and the popularity of mutual funds has helped provide an extra dividend for members of the Investment Company Institute - a cut in dues.

The ICI reduced its membership fees by approximately 20 percent during the past three years because of its growing reserves, the non-profit group said. Last year, the fee cuts resulted in a slight reduction in revenue from dues for the first time in at least six years. Nevertheless, the ICI's total revenue of approximately $37.8 million still exceeded expenses by about $1.5 million. Total revenue decreased by about one percent from 1997.

The cuts in membership dues came during a five-year period in which the mutual fund industry's assets - the basis the ICI uses to assess dues for mutual funds - grew from approximately $2 trillion in 1993 to about $5.5 trillion as of Dec. 31. The ICI's net assets nearly tripled during the same five-year period. (See accompanying chart).

The ICI could make further cuts in fees if reserves continue to grow, said Chris Wloszczyna, an ICI spokesperson. Wloszczyna declined to disclose the ICI's fee rates. John J. Brennan, ICI chairman and chairman and CEO of the Vanguard Group of Malvern, Pa., did not return calls seeking comment.

The ICI's finances are outlined in the group's federal tax returns. The ICI's fiscal year runs from Oct. 1 to Sept. 30. The Internal Revenue Service received the ICI's most recent tax return on Feb. 19. The IRS produced the return on June 10 in response to a Mutual Fund Market News Freedom of Information Act request.

The ICI had total revenue of approximately $37.8 million and expenses of $36.3 million for the year ending Sept 30.

The ICI's savings and investments totaled $34.4 million for the year. The organization's outstanding bills and liabilities reduced net assets last year to $27.2 million. Combined savings and investments have risen from approximately $11.7 million as of Sept. 30, 1993. Net assets stood at $9.2 million as of that same date.

The filing also revealed that the ICI's expenses increased by more than 60 percent from 1993 through 1998, rising from approximately $22.4 million to $36.3 million. The growth in expenses is "the cost of representing a growing industry," Wloszczyna said. In 1998, salaries and wages for rank and file employees of the ICI constituted the biggest single expense, at approximately $8.7 million. The organization has approximately 160 employees, Wloszczyna said. In 1993, the figure for salaries and wages was $5.5 billion.

The ICI tries to keep its reserves equal to approximately six to eight months of operating expenses, said Lawrence Maffia, senior vice president for the ICI. The effect of the fee reductions on ICI revenues has been limited in recent years because of market appreciation, Maffia said.

The ICI staff recommended the fee reductions, he said. The ICI's board of governors makes the final decision on fees and the ICI's budget, Wloszczyna said.

As of May 28, the ICI's membership included nearly 7,600 open-end mutual funds. The total assets of those funds, nearly $5.9 trillion, accounted for approximately 95 percent of the mutual fund industry's assets. In addition to the open-end funds, ICI members include about 480 closed-end funds, eight sponsors of unit investment trusts and investment advisory firms. The ICI's work includes political lobbying, investor education and research.

The fee reduction led to slightly reduced revenues last year from $38.1 million in 1997 to $37.8 million. ICI dues revenue decreased from approximately $30.1 million for the year ending Sept. 30, 1997 to $29.7 million last year.

The Securities Industry Association, a non-profit trade group whose membership includes ICI members, adjusts fees annually in order to maintain revenue in line with expenses, said James Spellman, a spokesperson for the SIA. The SIA had an increase in revenue from dues of about $1 million last year. Total dues revenue was $16.6 million. Overall revenue for the SIA was $27.4 million and expenses were approximately $27 million.